RNAi Therapeutics Stocks (Part 2)

Having covered the most developed RNAi companies (Alnylam, Arrowhead, Dicerna) yesterday, this blog entry will discuss RNAi plays that are somewhat less established, but nevertheless could represent interesting investment opportunities.

Silence Therapeutics (SLN.L)

This London-listed company is roughly 2 years behind Arrowhead Pharmaceuticals and Dicerna.  Similar to those, Silence has set its sights on exploiting targets in liver hepatocytes using GalNAc conjugate technology.  Its first program targeting TMPRSS6 for iron overload disorders should enter the clinic in the first half of 2019.

The strength of Silence is partly its RNAi trigger IP position which, if the claims stand, should read on Alnylam’s 3-4 drug candidates that could come on the market over the next 2-3 years.  In my opinion, it would take a generous interpretation of what constitutes a ‘pattern’ for LNP-enabled Patisiran to fall under Silence IP, but it is much less of a stretch for the more stabilized GalNAc-enabled Givosiran, Fitusiran, and Inclisiran molecules in late-stage development.

Part of the potential upside could  therefore come from a settlement of the IP litigation that Silence has filed against Alnylam as it could hamper the commercialization of Alnylam's RNAi drug, especially as it ramps up for the launch of Patisiran. 

The reason why such revenues would be meaningful to the company is that Silence is run extremely well in financial terms such that these funds would neatly feed into Silence's operations as it is about to expand clinically all the while minimizing shareholder dilution. 

This, however, could also be viewed as a necessity since it is much more difficult for a London-based company to raise the kind of biotech ‘risk capital’ that allows companies like Alnylam in the US to really press down the gas pedal to pursue a grand vision without killing shareholders.   

Silence Therapeutics is an investment for those that value the pursuit shareholder return instead of mere market cap growth (=management bragging rights).  While I support this strategy, I am still largely on the sidelines as the company needs to address the anemic trading volume which makes it very costly to trade in and out.

RXi Pharmaceuticals (RXII)

Who doesn’t dream of striking it rich overnight?  If so, RXII is the type of stock that in the right biotech environment could be your daily biotech double in the not-so-distant future.

After all, which other biotech with a market cap of ~$15M can boast about 3 clinical data read-outs before year-end and one additional in early 2018?

1) Q4 2017: phase II results dermal scarring (RXI-109)

2) Q4 2017: phase II results warts (samcyprone, non-RNAi)

3) Q4 2017: UV-induced hyperpigmentation results, consumer testing (RXI-231)

4) Q1 2018: phase I/II results retinal scarring (RXI-109)  

It is possible that the first 3 data read-outs could show that the agents are active and well tolerated, but where there will be a discussion about the commercial adoption of these agents in the real world.  Therefore, the real fireworks may occur following the results from the retinal scarring phase I/II trial in early 2018.  Here, the self-delivering RNAi trigger technology is tested for the first time in the eye where for reasons of technical feasibility (more equal biodistribution throughout eye than in the skin) and clinical application I see the most potential for this technology.

Downside risk comes from management that is pitifully ignorant about the workings of the financial markets and shareholder value creation.  If RXi fails to ignite investor interest in the wake of any of these 4 shots on goal, we could well see a continuation of the financial death spiral that has seen RXII lose 98-99% of its value in the last 3-4 years!!!

I own approximately 3% of the outstanding shares of RXII and will try to add on any weakness ahead of data release.

Arcturus Therapeutics (ARCT)

In sharp contrast to RXi, I view management of Arcturus as far more savvy when it comes to the financial markets and building a biotech company of decent size.

Arcturus, which has recently gone public via a reverse merger, has its roots in RNAi technology, largely by copying liposomal delivery technology from Tekmira (now Arbutus) and then licensing related RNAi IP from Marina Biotech.  In light of the Patisiran APOLLO results, you could view the platform as fundamentally de-risked.

In fact, its lead program was an RNAi program to address TTR amyloidosis.   Since then, however, Arcturus has largely re-tooled itself as an mRNA Therapeutics company using LNP delivery technology.  Although its pipeline is not as prolific as that of much-better known Moderna, it appears impressive for a company with a market cap of still less than $100M just as its partnering activities.

Therefore, Arcturus is a bet on a management that can take average science to build a significant biotech as it talks the language of Wall Street and Pharma deal makers.  It was one of my early biotech investment mistakes to undervalue big-mouthed management relative to science. The best science can always be acquired once you have lowered your cost of capital by growing market cap.

I have a starter long position in ARCT as I wait for it to be discovered by larger hedge fund manager.

The final instalment of this series will cover oligonucleotide therapeutics companies Ionis Pharmaceuticals, Wave Life Sciences, Regulus Therapeutics, and Sarepta.

RXi Pharmaceuticals Could Be Much More Than Skin Wound Healing

RXi Pharmaceuticals today commenced a secondary offering setting it on course to raise ~$10M, enough to finance the company for another year while expanding its pipeline and technology.  It could thus mark a new chapter in the life of this company which had shoe-boxed itself into a single-product (RXI-109 for dermal wound healing) company following a toxic 2012 financing that gave Tang Capital Partners de facto control over the company (pro tip: when you see the likes of Tang or Deerfield getting involved, it usually is not to the benefit of common stock holders). 

The news this morning that the preferred stock overhang (àTang Capital Partners) had finally been cleared, then paved the way towards the financing (amount and pricing to be determined).  

With RXI-109 winding its way through phase II studies, it became clear that RXi had to open itself up to new opportunities enabled by its promising self-delivering RNAi platform.  The financing will initially allow RXi to develop RXI-109 also for ocular (retinal and corneal) scarring-related indications such as wet AMD and cataract surgery.  First eye-related clinical trials with self-delivering RNAi triggers are expected to commence later this year.

The eye is an interesting application of sd-RNAi technology not only for the lucrative eye disease market (both genetic and age-related of considerable unmet medical need), but also because they seem to be able to penetrate throughout the eye (see image) whereas in the skin, distribution currently is limited to areas close to the injection site barring new delivery breakthroughs (patches, creams and the like).  In addition to cholesterol, it may also be interesting to test other ligands such as Vitamin A and E for enhanced uptake into certain ocular cell types.

Lots of unexplored potential

Beyond the skin and eye, self-delivering RNAi strategies hold considerable promise for other tissue targets, both by direct/local and systemic delivery.  In terms of local delivery, I would be highly interested in the biodistribution of intrathecally administered sd-RNAi triggers in non-human primates.  This is because of their long phosphorothioated single-strand overhang and thus similarity to phosphorothioate antisense oligonucleotides which are starting to show amazing results in the clinic for CNS applications (watch out for update on the infant ISIS-SMNRx study by Isis Pharmaceuticals).

In terms of systemic delivery, sd-RNAi chemistry and structure may synergize well with conjugate-RNAi approaches, both in their simple (--> Alnylam GalNAc-type) and more refined form (--> Arrowhead DPC-type).  Even without further modification, RXi-type self-delivering RNAi has shown surprising knockdown efficacy in models of pre-eclampsia as shown by respected UMass scientists Melissa Moore and Anastasia Khvorova (formerly of RXi Pharmaceuticals).  

If RXi can get the backing from serious biotech investors and eventually a new management fit to lead a modern biotechnology company, the current $16M market valuation (for RXI-109 in the clinic for dermal scarring and soon in the eye; self-delivering platform potential; stake in MirImmune) of the company could make it an irresistible investment opportunity.  If management, however, continues to dig in their heels and refuses to listen to outside advice chances are that the financial death spiral will continue. 
   

Suspicious shorting into financing

It used to be common biotech practice that investors-in-the-know were allowed to short into financing resting assured that the offering will allow them to cover at a lower share price.  It is therefore remarkable that in the days and weeks before the financing, the short interest has sky-rocketed from virtually none to around 10% of the float and possibly much more by now due to the delays in reporting short interest.

RXi Pharmaceuticals Reality Check

Last week on December 17, RXi Pharmaceuticals announced (3-month) results from a phase II study of the company’s lead candidate RXI-109, an RNAi Therapeutic for the treatment/prevention of dermal scars.  

In this lower abdominal scar revision study 1301, one side in a given patient was treated with drug on days 1, 8, and 15 following surgery (immediate group) or on days 14, 21, and 28 (delayed group), while the other side was given placebo.  An assessor blinded to which side was injected with RXI-109 or placebo was then asked to tell drug from placebo. 

According to the release, the drug-treated side was (correctly) identified 54% of the time in the delayed treatment cohort versus 24% of the time in the immediate treatment cohort.

In the absence of further information on the identification procedure and scoring used (e.g. it is likely 'there is no difference' was a possible answer which would somewhat undersell the results), the following interpretation seems logical: in the delayed treatment cohort skin wounds treated with RXI-109 looked no different than those treated with placebo.  Moreover, when treatment was started soon after scar revision surgery, RXI-109 possibly did harm.

It certainly would have helped if RXi provided the VAS score as it did in the one-month update in September.

To me, this result looks like one of the worse types of biotech trial failures.  If you like to talk about 'misleading', then RXi should not look further than the title of their own press release on this failed study:

'RXi Pharmaceuticals Announces Sustained Effect of RXI-109 at Three Months Post Scar Revision Surgery and the Completion of Enrollment for its Phase 2a Trial RXI-109-1301'

Two days after the clinical trial news, the company then announced that it had licensed a non-RNAi dermal compound which is currently in phase II studies for cancer and other proliferative diseases of the skin.  A proprietary formulation of small molecule ‘immuno-modulator’ diphenylcyclopropenone (DPCP), aka Samcyprone, from an obscure company called Hapten Pharmaceuticals.

Now on to RXi’s financials...

At the end of Q3 2014, RXi had about $10M in net cash ($10.69M cash/cash equivalents minus $1M in liabilities), spending about $2.25M a quarter.  This means they presently have ~$8M in cash minus the undisclosed cash it spent on the Hapten deal.  If RXi continued with RXI-109 and RNAi and if it initiated the phase II clinical studies with Samcyprone, the cash burn would obviously increase.  Let’s say to $4M per quarter à $8M/($4M per quarter)= 2 quarters of cash left.

...and RXII the stock

Obviously realizing that the new asset is not not solving their  financial predicament, by contrast it is only worsening it, concurrent with the Hapten deal RXi entered into a new stock purchase agreement with Lincoln Park Capital ('ATM') according to which RXi Pharmaceuticals can sell LPC newly issued shares to raise capital.  The way these deals work is that LPC would get a discount on the shares and turn around and sell to the public market to lock in the profit.  This means that if RXi really counted on such revenues to keep their PCR machines running, any substantial rally in RXII is likely to be met with the selling of new shares.

Adding to the pressure is the fact that major shareholder Tang Capital, holding just shy of 50% of the fully diluted share count, has been steadily selling down its ownership in RXi.  Moreover, some of the Hapten deal (incl. milestones) was/will be paid in shares and it would be reasonable to suspect that the owners of Hapten are not in it for the potential of making money with speculating in RXII shares.  

If you consider a fully diluted market cap of $70-80M, the present situation with RXI-109 and the failure for years (also under Galena) to advance the self-delivering RNAi platform, the case can be made that there are better biotech stock investments out there.

Pick your poison

For the above reasons (including financial limitations), I tweeted last week that the move to license Samcyprone more or less amounted to RXi Pharmaceuticals getting out of the RNAi game.  In fact, the bitter irony is that RXi was born out of parent company Galena Pharmaceuticals making exactly the same move (marginalizing RNAi by acquiring a non-RNAi clinical asset).

So yesterday, the CEO of RXi Pharmaceuticals issued an Open Letter that, to sum it up, I was misleading the public with my conclusions about the strategic shifts happening at the company and was thereby scaring investors into selling their shares:

'We can only hope that investors and shareholders who read blogs, tweets and postings from third parties purporting to have an informed view on our business will also do an in depth evaluation of the background of those who write such "reports", their past contributions to the actual progress in the RNAi space, and their possible associations to competitors and other firms working in a similar space. Notwithstanding these ill-informed criticisms, we remain optimistic about the prospects of the Company and our core technology.'

By contrast, RXI-109 was on track, the company’s RNAi platform alive and kicking, and immune modulator (aka skin irritant) Samcyprone fully being aligned with RNAi gene silencing as it changes gene expression (I’m impressed).

At this point, a friendly piece of advice: RXi ought to label Samcyprone an 'immuno-oncology' drug which would almost sound as sexy as the VEGF compound RXi is now 'synthesizing'.

So I’m not sure what to hope for: a) that the CEO does not understand that continuing with two phase II compounds under present circumstances is akin to financial suicide, especially from a shareholder’s point-of-view; or b) that he understands it and scapegoats social media, including myself, for calling the bluff in an effort to win time.

   

I suspect it’s the latter and either way shareholders are unlikely to come out ahead.  After all, when he took the helm of RXi Pharmaceuticals at a time when it was fashionable to bash and ridicule RNAi, he made it clear that he was a ‘small molecule guy’ at heart. If I may ask you Geert, what exactly were your contributions to the actual progress of RNAi Therapeutics?

RXi Provides Disappointing Clinical Update for Scarring Drug

At the Rodman & Renshaw investor conference today, the CEO of RXiPharmaceuticals dropped a little bombshell in the form of a disappointing clinical update on their lead clinical candidate, RXI-109 for the treatment or prevention of dermal scarring.  In that interim look for efficacy, RXI-109 and placebo were not really distinguishable in scar severity sending the stock down 30-40% in the middle of today’s trading session.

1301 study design

The 1301 study is the first of three phase IIa studies evaluating 109 in a number of different scar settings.  In this case, RXI-109 was administered following scar revision surgery on the lower abdomen.  Part of the same scar received either 3 injections of the self-delivering RNAi compound, another part placebo solution.  Half of the subjects (50% of the study/16 subjects have enrolled as of today), received 109 on days 1, 8, and 15 following surgery (cohort 1), the other half received injections on days 14, 21, and 28 following surgery, the latter apparently inspired by clinical design trends observed for competitor antisense drug from Pfizer/Excaliard.

I find that blindly adjusting your clinical design based on such competitive intelligence is a worrisome sign of lack of confidence.

1301 study results

The first interim look for efficacy took place at 1 month post-surgery.  Results were based on the blinded visual assessment of scar severity on a scale from 1 (good fine-line scar) to 10 (worst scar imaginable). 

Unfortunately, the close to 50% knockdown of target CTGF observed in a similar 3-dose phase I study, did not translate to an obvious improvement in scar severity: for the immediate treatment group, the VAS score was 2.0 for both the 109 and the placebo side of the scar; for the delayed treatment group, the VAS score was slightly better in the 109 side (2.0) than on the placebo side (2.5) even reaching statistical significance.

Before you get excited and buy into the biological rationalizations by the CEO for why it makes sense that delayed, but not immediate would exhibit such a benefit, note that a VAS difference of 0.5 on a scale from 1 to 10 would appear to be clinically meaningless despite the statistical significance.  Moreover, looking at the VAS scores across the board, it seems that the placebo side in the delayed treatment cohort is a statistical outlier as it should not have performed any different than the placebo cohort in the immediate treatment group.    

On the other hand, given that the scars have not had time to fully develop and the VAS scores were still so low, it is possible that real differences will emerge at later time-points such as month 3 when the next interim look will take place and it may thus be premature to declare the study or drug for that matter a failure.

RXi needs a plan B and investors patience

In light of the disappointing trial update, it may not be a coincidence that Geert Cauwenbergh today took the opportunity to talk more about their other, preclinical pipeline candidates in the dermatology and ophthalmology space in much more detail than had been the case.   

I am less excited about the prospect of RXi expanding their dermatology footprint given the relatively modest gene knockdowns observed, limited tissue penetration from the site of injeciton, and the cosmeceutical nature of their current line-up (acne, depigmentation etc).  By contrast, I am much more excited about  the prospect and value of self-delivering RNAi triggers in the ophthalmology space given the great unmet medical needs there and the highly encouraging tissue penetration/biodistribution data for self-delivering RNAi in that organ.

There will be more to talk about that in the future.  As stock market investors, however, one has got to wonder whether management is aware of that value and knows how to best exploit it (pro tip: VEGF is a no-no for RNAi in the eye).  Even more concerning is the fact that the majority shareholder (Tang Capital) still holds close to half of the company and is in the process of unloading it thereby putting constant pressure on the stock. And with only $10M in the bank, you know what the trip to the Rodman & Renshaw conference was all about.

So no more than a small starter position for me despite the steep sell-off today.

Antisense Comparison Provides Hope for RXi’s Dermal Scarring Drug Candidate

In early December, RXi reported phase I data from new cohorts that were added to the multi-dose study of RXI-109 in dermal scarring.  Accordingly, by increasing the dose to 10mg self-delivering RNAi trigger from previously 7.5mg per injection site, the company was now able to achieve a 50% target CTGF gene knockdown (5 and 7.5mgs: 43%). 

Based on the meager 30-40% knockdowns and apparent efficacy that were observed in comparable clinical studies targeting the same CTGF with a phosphorotioated antisense compound at 5mg per cm scarline_­, the prospects of RXI-109 would suddenly appear to be much brighter.  Of course, the ISIS compound was spun out into Excaliard which was then acquired by Pfizer in late 2011 for the apparently promising data observed with the dermal scarring candidate EXC001.  EXC001 is now in late-stage clinical development.

Of course, there are a number of caveats with this reasoning.  For one, although the study protocols appear very similar, it is possible that the tissue biopsies taken to obtain the CTGF knockdown measures were of dissimilar sizes.  Given that CTGF knockdown can be expected to wane quickly away from the injection site, such differences could have a material effect on the apparent knockdown efficacy. 

On the darker side, when you consider a nice visual therapeutic effect (see picture) in light of a 30-40% knockdown, you start to wonder whether the actual effect on scarring was less due to blunting of CTGF expression and more due to some non-specific immune-related effect of the phosphorothioate backbone in the antisense compound.  The RXI-109 compound may not ‘benefit’ from such an effect.

Nevertheless, the 10mg dose results are a step forward and form a useful basis for the phase II studies that RXi Pharmaceuticals will be rolling out this year in lower abdominal scar revision (already initiated), keloid scar revision, and scar revision following cosmetic breast surgery.  

Unfortunately, prospects would have been even brighter had the company employed a more potent RNAi trigger design.  And when the CEO, in 2014, still shows a slide with Kreutzer-Limmer controlling dsRNA lengths of 15bp and over (to justify the use of dsRNA < 15bp), I would suggest they update their presentation slides.  Similarly, it would be honest to not talk about a market cap of $50M, but to present their more meaningful capital structure, including preferreds and the like.

Delivery Advance Illustrates Influence of Cosmetics Skin RNAi Therapeutics

The skin has always been a target organ of considerable interest to the RNAi Therapeutics industry due to its apparent accessibility for delivery purposes plus the fact that there are various unmet needs ranging from the severe genetic disease (e.g. epidermolysis bullosa, pachyonycia congenita) to cosmetic desires.  Interestingly, it is the latter that in many ways is driving skin RNAi Therapeutics these days.

Motorized microneedle array with unprecedented silencing efficacy

    

In an important advance in the rate-limiting area of delivery, Hickerson and colleagues from TransDerm and various other collaborators recently published 80% gene silencing efficacy in a mouse model for epidermal gene expression using a motorized microneedle array borrowed from the cosmetics industry (in particular the Triple-Mby BomtechElectronics of cosmetics hot-spot South Korea).  This compares to 50% and 33% gene silencing in the same model using simple (static) microneedle arrays and intradermal needle injection, respectively, before.  Accordingly, this represents a 2.5 to 3.5-fold increase in gene silencing efficacy when considering how much of the undesired target protein you are left with!

I have to admit that I did not double-check that indeed the same siRNA sequences and self-delivering RNAi trigger modifications were used in the various studies which could have affected results.  However, since these results have all been reported by TransDerm and the goal of TransDerm was to compare delivery efficacies of various technologies, I am willing to accept the comparability claim by the authors. _­

The trick with the motorized microneedle array appears to be that following penetration of the stratum corneum barrier motion (oscillation) allows for a larger volume of drug to be deposited in the epidermis than with a static needle array.  Moreover, the depth of administration can be adjusted for optimal epidermal delivery and to make it pain free as well, unlike the original high-pressure hypodermic needle attempts by TransDerm.   With this, it should be possible to deposit low single-digit milligram of RNAi triggers to an area the size of a tip of a thumb- which is quite a bit.

A possible limitation of such microneedle arrays is that the administration itself causes microinjuries to the skin.  Therefore, you want to make sure that you do not end up making things worse, especially in applications where wound healing and restoration are the goal.  Since the technology is apparently used in the beauty industry already, it is unlikely that its application will leave insightly scars and the likes.

I look forward to seeing a technology like motorized microneedle arrays in conjunction with self-delivering RNAi trigger formats being used in the clinic.  Initially, the technology is most amenable to applications where the focus is on locally defined areas such a skin parts prone to blistering.  However, taking advantage of imaging technologies and 3-D printing, I envision a future in which the technology would also be possible to treat large areas of the skin, if not the entire body surface.  As TransDerm illustrates, combining the capabilities of existing technologies from disparate areas often enables the biggest advances.

RXI-109 for dermal anti-scarring now available under the ‘Specials’ provision in the EU

Anybody that has gone to a dermatologist knows how blurred the lines between medical and cosmetic applications have become when it comes to the skin (cosmeceutical concept).  Taking advantage of the regulatory grey zone, it is skin applications that are leading the charge in the commercialization of RNAi gene silencing in WoMan.  Following a claimed treatment for skin blemishes marketed as Britena Whitening & Anti-blotch Cream by Biomics (partnered with Benitec on HepB), it is now RXi Pharmaceuticals that has signed a distribution agreement for its dermal anti-scarring drug candidate RXI-109 with Ethicor. 

The goal of this arrangement is to drive early sales based on an exception of European drug legislation that allows for the use of experimental drugs prior to proper marketing authorization.  All it apparently takes is a judgment call by the treating physician.  I can see the point of this ‘Specials’ provision for severe, orphan diseases as a form of compassionate use when there is intriguing early clinical evidence of efficacy and safety, but for an anti-scarring treatment, mmh...you can easily see how consumers willing to take risks in the quest for beauty will make their physician give them an injection of the stuff.

But then again, when you see how much unproven, potentially harmful potions and lotions are being sold on the cosmetics market, it is hard to argue why you should make an exception with RNAi as long as care is being taken that somewhat riskier (depending on chemistry) systemic exposures remain low and yours truly does not have to pay for it via increased insurance premiums.  I guess my biggest problem with all this is that the company distributing RXI-109 calls itself ‘Ethicor’ just as I get nervous when somebody starts a sentence with ‘to be honest’ and what follows is more often than not a lie.

RXi Reports 43% CTGF Knockdown in Multi-Dose Dermal Anti-Scarring Trial

Today, RXi Pharmaceuticals announced the results from its multi-dose phase I study of RXI-109, the company’s self-delivering RNAi compound for dermal anti-scarring.  Importantly, in the two highest of the three dose cohorts a credible 43% (average) gene knockdown was observed three days after the last (=third) intradermal injection of RXI-109.  It is the first time that a knockdown was reported for the so-called ‘self-delivering’ class of RNAi triggers.

The results followed those from a single-dose study lastmonth where dose-dependent gene knockdowns were claimed three months after the single injection (note the difference in the time points).  Turns out that this was a slightly misleading conclusion as in my book a numerical 15% target reduction does not constitute a clinically meaningful knockdown for the vast majority of target genes and indications, and I'm not even discussing the precision of gene expression measurements.

Whether a 43% knockdown of CTGF is clinically meaningful also remains to be seen as no data were presented on the actual impact of RXI-109 on scar formation.   Pfizer, following its acquisition of dermal scarring antisense company Excaliard, would probably know best what type of knockdown was required.

   

In a broader sense, the 43% number also raises the question of whether self-delivering RNAi triggers by RXi Pharmaceuticals will be a class of gene silencing agents that will struggle to achieve 50% gene silencing, instead of 70, 80, 90% and more that might be required for most indications.

Overall, mediocre results and it stands to reason that the future of RXi Pharmaceuticals will be in ocular indications and not in dermal anti-scarring.

Comment on Alnylam's $3B market cap

I, like many of you, have watched with wide open eyes Alnylam reaching a $3B market cap today. In less than two weeks, this company added over $1B in valuation based on highlighting in their press releases the best single datapoints from individual patients (e.g. 'over 80% knockdown' for ALN-TTRsc), instead of average knockdowns, area under the curves, and dosages.

While that does not entirely surprise me as a veteran of reading between 'topline data', a more intriguing question is what the company will do with such a low cost of capital.  Remember, the situation was similar about 5 years ago when Alnylam failed to either raise capital and/or acquire Tekmira to avoid the litigation.  I expect the company to act this time on its share price, a view supported by constant analysts upgrade on any news piece the company throws in front of them (--> fees for investment banking business).

RXi Reports Dose-Related Knockdown Three Months Following Single Injection

RXi Pharmaceuticals today reported top-line results from the first of two phase I studies with RXi-109 in dermal scarring.  Intriguingly, the company claims to observe target gene knockdown three months following a single intradermal injection of their self-deliverable RNAi trigger (p=0.02) in a manner that was apparently dose-related. 

Such a drug-dependent and dose-related knockdown would exceed my expectations from this trial as stated in a recent preview here.  The reason why I merely expected to see a correlation between CTGF levels and phenotypic effect on dermal scarring being reported today is that I did not have high confidence that the tissue residence time of RXI109 would be prolonged enough to observe a bona fide RNAi knockdown. 

To wit, the tissue biopsy on which this data rests was obtained during a tummy tuck three months after the intradermal injection of the RNAi.  To assess whether there was an RNAi knockdown in such a single-dose study, I would have thought that an early time-point such as two weeks after injection would have been more appropriate, also because it is likely that some of the CTGF-producing cells might be proliferating in this setting (RNAi duration inversely correlated to proliferation status).

The notion that a correlation between CTGF levels and wound healing would be observed was based on CTGF reflecting tissue inflammation.  So regardless of whether there was an RNAi effect or not, you might expect to see such a correlation.  It is difficult, however, to explain a drug-dependent and dose-related target gene knockdown with this notion, except for by a rare coincidence.

These results then bode well for the multi-dose phase I studies from which results will be reported in time for the Investor and Analyst Symposium on July 12.  While safety was the primary focus of the first study (no adverse event on the early wound healing process confirmed), the effect of RXi-109 on wound healing will be the focus of the second study.  It should be added though that given the small size of the trials and the patient population which is not predisposed to scarring, spotting the difference will be tough.

Disclosure: long RXII.

Can RXi Pharmaceuticals Spot the Difference?

The imminent announcement of phase I results for RXI109 will be a clinical highlight of RNAi Therapeutics in 2013.  RXI109 is the self-delivering RNAi trigger against dermal scarring and is developed by RXi Pharmaceuticals.  Needless to say, as the company is committing 90% of its resources to this trial and indication, the results should cause major volatility in the stock.

While the dermal anti-scarring landscape is complex, RXI109 for the present indication can safely be categorized as a cosmeceutical.  According to RXi Pharmaceuticals, already $100M are spent each year in the US on non-FDA approved ointments against dermal scarring.  The interest in RXI109 is thus for its commercial potential and the clinical results are a milestone in the development of so-called ‘self-delivering RNAi triggers’.

Self-delivering RNAi triggers are a concept coined first by Dharmacon (although one could argue that was largely a branding achievement as it essentially involved known cholesterol conjugation), but is getting more widely adopted these days.  Beyond its local indications for which they self-delivering RNAi triggers were initially developed, I expect the concept to also be applied to certain systemic delivery strategies.  I could imagine that in an effort to render GalNAc-siRNAs more potent, self-delivering chemistries will be useful.

Phase I studies

RXi has conducted two phase I studies.  In both studies, volunteers got multiple surgical incisions symmetrically on both sides of the abdomen.  For each pair of incisions, one side either received RXI109 or placebo by intradermal injection.  In the first study, RXI109 was given just once before incision, from 1mg to 10mg per 2cm incision (similar range as in the Excaliard antisense trials).  In the second study, RXI109 was given three times within two weeks from 2.5mg to 7.5mg per 2 cm incision.

In addition to safety and tolerability, the important endpoints will be a visual assessment of scarring and then, based on a biopsy obtained from a tummy tuck at Day 84, important biomarker data in the form of CTGF levels (the target gene) and a histological evaluation of the scar tissue.

Although this is a blinded study, the company has discussed blinded results in extenso.  On the safety front, there seems to be little cause for concern, and adverse events are consistent with what you would expect from an incision.  Management appears to be very bullish on the therapeutic outcomes since in many cases left and right sides look different.  So if they are different, the side that looks better should have been given RXI109, right? 

Unfortunately, you have to look very hard to spot the differences.  In one example shown, the ‘average differences’ in scar tissue area were 31%.  Since they will put their best foot forward with this example, the largest effect size that we can expect is 31%.  And this assumes that in each case, it is the drug-treated side that outperforms the placebo-treated side. 

It is thus difficult for me to be optimistic that this trial allows for a therapeutic effect to be demonstrated.  For this, the natural wound healing variability would have to be really small (I admittedly don't know what this is).  On the other hand, it is with this symmetrical, intra-patient control design that such small differences might be teased out.  Regardless, I expect enough data to be collected from the studies that it will make for a nice headline and narrative about how RXI109 had improved wound healing and the correlation with CTGF (I bet there will be a correlation, whether due to knockdown or not).

So while I think that RXI109 is a decent RNAi Therapeutics (not the best possible one given the short dsRNA length), it will be important to conduct future studies in patient populations more prone to scarring to increase signal to noise.  This could be for example in the scar-revision setting or in Asian populations.

   

Trading the event

As I expect major volatility and have some confidence in the science behind RXI109, I have taken a long position ahead of the event.  It is not clear whether the results from the two studies will be presented separately or together.  I suspect the latter given that the CEO of RXi in February/March guided the results from the first study to be forthcoming in April.  Since it is almost June already, it is likely that the company expects the biggest bang from presenting the results together.  This should happen before July.  Once again, given that there is so much potential for data-mining, I expect positive headlines- justified or not.

RNAi Therapeutics Companies Cashed Up and Ready to Strike

With the $36M fund-raising last night, Arrowhead Research has become the 4^th publicly traded RNAi Therapeutics company in short succession to cash up for a real shot at drug development success.  The other companies are Tekmira, RXi Pharmaceuticals, and as it was made official this morning, Silence Therapeutics.

The money will be spent on promising drug candidates in the cancer field (TKM-PLK1, Atu027), chronic HBV (ARC520), and scarless wound healing (RXI-109) without having to take dangerous short-cuts or partner the crown jewels prematurely.  Moreover, it will help to advance critical delivery technologies such as DPC, SNALP, and self-delivering RNAi triggers which should provide for non-dilutive partnering opportunities without having to entertain low-ball offers.   

It is notable (and not surprising) that unlike Marina Biotech and Benitec which so far have failed to similarly escape the financing maelstro, Tekmira, Arrowhead and Silence all sport healthy in-house R&D operations.  RXi does not have such operations- yet.  However, they were critical for bringing RXI109 into the clinic on which the company’s ~$80-90M market cap rests.   

The cash infusions should also give the companies, which among them own most of the leading platform technologies, the opportunity to make up for the 20-30 fold gap in valuation to the likes of ISIS Pharmaceuticals (2.3B market cap in antisense), Alnylam (1.5B market cap in RNAi), and Sarepta (1B market cap for a phase II orphan indication).  If monoclonal antibodies are any guide, this will not play out as the winner-takes-all the public markets have it right now.

Below is a quick rundown of the newly cashed-up crop of RNAi Therapeutics companies for those new to the field.

Disclosure: I am long Tekmira and Arrowhead Research. 

Disclaimer: Investments in RNAi Therapeutics carry more risks than you want to know and think about.  The following can only be a very brief teaser for you to start your own due diligence.

Arrowhead Research: In the pursuit of a cure for chronic HBV

Market cap: ~60-70M (of which ~$35M in cash)

Unless Arrowhead Research comes up with a compelling orphan drug application of its technology when it will disclose its second development program in H1 2014, investment success will hinge on the fate of ARC520.  ARC520 is Arrowhead's unique attempt at a functional cure for chronic HBV that will enter clinical development shortly.  I interpret last night’s fund raising in that the IND-enabling tox studies were positive.  The results of these will be critical in determining whether ARC520 can be dosed high enough to safely achieve the type of 90% HBsAg reductions that will be required for that lofty goal.

With cash of around $35M, Arrowhead can now retain full rights to that program at least after value-inflecting phase I proof-of-concept knockdowns have been achieved.  To extend the cash runway beyond the predicted ~2 years, Arrowhead owns the exciting Dynamic PolyConjugate delivery technology, particularly the subcutaneous version and potential new developments for cancer applications.  DPC offers an obvious non-dilutive funding opportunity.

Having slept over the announcement of the PIPE financing which doubles the share count near multi-year lows, I believe it still was a good one in a difficult situation.  Potential partners would have liked to exploit the financial weakness of Arrowhead and the fast-money crowd (think Dawson and Rodman) would have liked to reap risk-free gains from trading around a public offering.  Instead, Arrowhead seems to have found one or more significant investors that share the vision with management.  It is comforting that besides the sweet entry price, no special gifts in the form of warrants and otherwise seemed to have been handed out.  No wonder Arrowhead closed up 13% the day after the financing.

Upcoming catalysts:

  - Determination of maximally tolerated dose in volunteer study with ARC520;

-          - DPC partnering (always on the table);

-          - Modest ALN-TTRsc results would emphasize value of DPC (mid-2013) and may get Alnylam into  play;  

-          - DPC data on cancer (probably H1 2013);

-          - Nominating new development candidate (Q2 2014);

-          - ARC520 viral knockdown results in the Hong Kong trial (H1 2014).

Tekmira Pharmaceuticals: Quality Technology, Quality Financial Management

Market cap: ~$70M (of which ~$40M in cash)

If you are looking for relative stability in RNAi Therapeutics, Tekmira could be attractive.  It was its SNALP technology that enabled the current revival (with well over $300M capital inflows in the industry in the first 4 months of this year) and remains one of the two leading systemic delivery technologies with the value possibly shifting towards oncology indications.  Its leading development candidate, TKM-PLK1 for solid cancers, is about to enter phase II studies and has yielded promising dose-related evidenceof efficacy in phase I. 

The company’s aerosolized LNPs could be an unanticipated windfall for investors, although I have yet to see the all-important safety data.  Its Ebola biodefense program is not valued much by the market, but has been an important stabilizing factor for the company in terms of funding and represents an attractive commercial opportunity in its own right.  

Upcoming catalysts:

-          - TKM-PLK1 data from the expansion cohort (H2 2013);

-          - Design and initiation of phase II studies for TKM-PLK1 (H2 2013);

-          - Follow-up candidate and potentially data for TKM-EBOLA (H2 2013);

-          - Nomination of new development candidate;

-          - $5M milestones each if ALN-TTR02 by Alnylam enters phase III development and Ascletis   initiates a trial in China with ALN-VSP02 for primary liver cancer (both H2 2013/H1 2014);

-          - Partnering of SNALP delivery technology, also for non-RNAi, non-therapeutic applications (always on the table);

       - Monetization of Talon royalties (uncertain timing if at all) 

Silence Therapeutics: A novel cancer approach and strong purchasing power

Market cap: ~150M (of which $30-35M in cash)

Following a remarkable financial turnaround and management reshuffle, Silence Therapeutics has become a force to be reckoned with once again.  Unlike in the early days, it is the product candidates, and not RNAi trigger IP, that is the focus of the New Silence.

First and foremost is Atu027, an endothelially targeted RNAi Therapeutics aimed at preventing cancer metastasis.  The company believes that Atu027 will be most useful in combination with small molecules that aim at killing primary tumor cells and consequently is about to initiate phase Ib/phase II combination trials.

According to the information in the latest financing (which was approved today), a significant investment will be made in building a broader pipeline.  This will take advantage of the company’s three lipid-based delivery technologies: Atuplex (broad endothelial cells), DACC (lung endothelial cells), and DBTC (cells in the liver).  In general, the market cap and cash infusion position the company well to pick up some distressed RNAi and other assets.

Upcoming catalysts:

-          - Initiation of pancreatic cancer combination trial with Atu027 (H2 2013);

-          - Nominating new development candidate(s) (H2 2013);

-          - Pre-clinical data on liver delivery technology (2013);

-          - Partnering, also for non-RNAi, non-therapeutic applications

RXi Pharmaceuticals: Just dermal anti-scarring no more  

Market cap: $80-90M (of which ~$20M in cash)

RXi Pharmaceuticals is the company that popularized the self-delivering RNAi trigger concept.  Unfortunately for the company, it made a critical IP mistake of staying clear of the most potent versions it could have created with its ideas (à dsRNA length).  Furthermore, it seemed that it never was able to get anything into the clinic.

This changed last year with phase I initiation for RXI-109, a potentially superior alternative to Pfizer’s antisense-based dermal anti-scarring candidate.  However, as part of a reorganization, it essentially got rid of its R&D to focus all resources on RXI-109.

As you know, getting rid of in-house R&D is a mortal mistake if you want to be a platform-based company.  With the recent $16.4M cash infusion by OpkoHealth it will be interesting to watch whether they can become a self-delivering RNAi trigger platform-based candidate again, or whether the claimed company growth will largely be around expanding the indications of RXI-109 to other anti-fibrotic indications, especially ocular ones.

Upcoming catalyst:

-          Presentation of phase I data from RXI-109 (any day).

What to Expect from RNAi Therapeutics in 2013

2012 was the most exciting year in the ~12-year history of RNAi Therapeutics- both from a scientific and financial perspective.  Left for dead by most, unambiguous gene knockdown results in Man have allowed the technology to regain much-needed respectability.  With the start of 2013, the industry is looking to build on these successes with additional clinical trial results, interesting new therapeutic candidates and product-specific and platform-related deals, particularly in the area of delivery.  With appetite for innovation increasing in a low interest rate economy and with the orphan drug tsunami, 2013 could be a quite rewarding year for the discerning investor.

Clinical results to look out for

Clinical results in 2013 that will continue to shape perceptions of the technology include phase II study results for ALN-TTR02 in TTR-FAP by Alnylam, phase I results from its GalNAc conjugate version ALN-TTRsc, and phase I results from a number of other programs, foremost from oncology drug candidate TKM-PLK1 by Tekmira, ALN-AT3 for hemophilia by Alnylam, and finally RXI-109 for dermal scarring by RXi Pharmaceuticals.  

For ALN-TTR02, it will be important to confirm the impressive knockdown results from the phase I study, but over longer periods of time and with still acceptable safety.  ALN-TTRsc will be an important proof-of-concept for the subcutaneous delivery of RNAi Therapeutics and should provide a good idea of what to expect for ALN-AT3 which is based on the same GalNAc siRNA conjugate technology.  The success or lack thereof of Alnylam’s GalNAc technology will also affect the perception of Arrowhead’s DPC technology as either a competing or necessary subQ alternative to GalNAcs.

Tekmira’s TKM-PLK1 has not gotten much credit so far.  This, however, could change with the presentation of the full phase I results, possibly at this year’s ASCO.  I consider PLK1 as the single most attractive target for cancer RNAi and I am bullish that the molecular analyses will show molecular, if not clinical efficacy at this early stage.  And while TKM-PLK1 could overcome the safety-efficacy hurdle for some indications, the importance of PLK1 as a target demands that Tekmira will continuously work on improved follow-on versions.

Finally, RXi’s second phase into RNAi for skin applications.  I also consider dermal scarring as an interesting differentiated, because cosmeceutical RNAi product opportunity.  

Cool pipeline additions

As detailed in my last blog entry, there are two exciting infectious disease drug candidates for which clinical development will ramp up in 2013: Arrowhead’s ARC520 aiming to achieve for HBV what has recently been achieved in HCV (dramatically increased cure rates and less suffering from the side effects of interferons), and Calimmune’s ddRNAi-based HIV drug candidate aiming to keep the virus out of immune cells.

It looks like we will have to wait for clinical efficacy results from these programs for a while (2014-2015), either due to the nature of the cell competition approach involved in the HIV program or because of the use of healthy volunteers.  I believe the latter is what Arrowhead has guided for ARC520, but from an investor perspective this would be highly unforunate as this would delay the demonstration of gene knockdown with the DPC platform.  And from a medical perspective, I am struggling to see what the value or necessity of a volunteer trial would be.  

Deals and Big Pharma

In addition to clinical trial results, RNAi Therapeutics investors will be getting up each morning to check the internet for whether a deal has been announced.  Alnylam’s ALN-PCSK9 is the most imminent partnering candidate and will be an indicator of the mere differentiation value of RNAi Therapeutics.  While clinically more advanced monoclonal antibody-based programs for the industry’s most desired target, PCSK9, exist, should monoclonal antibody stumble as a class, RNAi Therapeutics and ALN-PCS could suddenly have the market for itself.  Considering the multi-billion $$$ potential of PCSK9, a gamble worth taking for a Big Pharma in my opinion.

Similarly to ALN-PCS in the hypercholesterolemia market, the size and complexity of the clinical program that would be required to turn ARC520 into a major HBV drug well exceeds Arrowhead capacities, and this could mean that we will see an early licensing deal around that asset, too.  While proof-of-concept clinical knockdown data would greatly increase the partnering value of ARC520, from a financial perspective (--> di-lu-tion!) early partnering may be prudent if no alternative non-dilutive capital alternative presented itself.

As delivery is gating for all of the above RNAi Therapeutics product opportunities, delivery naturally should be the subject of a few more platform-type relationships.  Tekmira’s SNALP technology for addressing diseases of the liver, lung, and cancer tops the list for a meaningful partnership (>$10M upfront), and also Arrowhead’s DPCs for liver-targeted gene knockdown ought to see some interest.  

Delivery-related deals should also reveal which Big Pharma company is still committed to the RNAi Therapeutics platform.  For the efforts at Takeda, Merck, and Novartis (the three most significant ones in terms of investment to-date), it could be a make-or-break year.  I cannot imagine that these groups are allowed to exist in their current forms for much longer before they get anything into the clinic.  For this, they probably need to swallow their own pride and accept that expert outside help is necessary for their delivery needs (rather than attempting home-brew versions).  Given the recent clinical and late preclinical results for SNALPs and DPCs, chances that they will finally do something have certainly increased.

A Happy New Year everybody.

RXi Pharmaceuticals to Write Off and Spin Out RNAi Assets

If you just blinked, you may have missed it: RXi Pharmaceuticals, now re-named Galena Biopharma, is to be a cancer vaccine company. As you may remember, when RNAi was still a hot technology in 2007, the parent company of RXi, small molecule biopharma CytRx, under the helm of corporate maverick Steven Kriegsman, acquired and then spun out RNAi assets in the form of RXi to be a pure-play RNAi Therapeutics company and cash cow for CytRx.

The financial details provided today on the transaction reveal that RXi has pretty much written off the value of its RNAi assets, chiefly among them the self-delivering RNAi trigger platform and the anti-scarring candidate RXI-109 which is about to enter clinical development, with the incoming investors taking over the lion's share of the company (83% of the shares) for their $9.5M in cash. Before RXi decided to be a cancer vaccine company, that is before the acquisition of Apthera in April, the then pure-play RNAi Therapeutics company had about 20 million shares outstanding, $10M in cash and was trading between $1.0-1.5, giving it an enterprise value of $10-20M. 5 months later, the net value of the same assets has become perhaps $2M.

On the other hand, the revaluation of the seemingly dead breast cancer vaccine candidate NeuVax was remarkably positive. From a value of essentially zero, it is now largely responsible for sustaining a market cap of ~$40M. Subtract about $20 in contributed cash, this still leaves a remarkable gain of ~100% for the asset (ignoring the value of the warrants and milestones). Having said that, it was definitely not the shareholders that profited from all that. Indeed, all these transactions make it difficult to follow where the money ended up.

For RNAi Therapeutics, there is still a hopeful message in all of this. The $9.5M in new investments is considerable. The confidence seems justified by the fact that RXi has found itself a nice niche by focusing on interesting self-delivering RNAi triggers, particularly for local and localized gene knockdown. The anti-scarring program also has potential to be an opportunity for the RNAi Therapeutics field to show relatively rapidly its clinical potential, especially since it can be measured against a promising late-stage antisense compound by ISIS satellite company Excaliard, EXC 001. So on the face of it the new investors seem to have gotten a good deal, although it is unclear how toxic the $45M in potential milestones to Galena are.

Today’s news shows how arbitrary the valuations of pre-clinical biotech assets can be and how fashion trends and promotion are often their main drivers. I’m so ready for the new season.